Astring of issues at several EntergyCorp. nuclear plants is prompting the company to focus on improvingoperations at the fleet, though the earnings impact of the initiative remainsto be seen.
"Firstof all, our plants are safe," Entergy Chairman and CEO Leo Denault said onthe company's first-quarterearnings call April 26. "If they weren't, they would not berunning. But this past year the performance of our nuclear fleet as a whole wasnot in line with our standards. Operational excellence is integral to ourbusiness model and a core competency we must maintain to maximize value for allof our stake holders. We've made it a top priority in 2016 to strengthen theculture of operational excellence throughout our organization."
"This could result in incremental nuclearspending, and we're working hard to mitigate any financial implications,"Denault added.
Entergyhas the only three reactors in the "Multiple/Repetitive DegradedCornerstone" column of the U.S. Nuclear Regulatory Commission'sfive-column matrix for reactors, one category removed from the agency's mostsevere rating, "unacceptable." Those plants are both reactors of the1,862-MW Arkansas Nuclear Oneand the single-reactor, 683.7-MW Pilgrimplant, which is slated for retirement.
InJanuary 2015, the NRC issued Arkansas Nuclear One, or ANO, related toinadequate flood protection barriers. Those violations came less than a yearafter two other violationsstemming from a 2013 fatal accident. Denault said the NRC completed itssupplemental inspection at Arkansas Nuclear One and is "confident,"the problems have been identified and Entergy is implementing a plan to correctthem. The agency will issue a, "confirmatory action," letter incoming weeks on Arkansas Nuclear One, and Entergy management will have updatesduring the company's analyst day presentation planned for June.
"Finally,it's important to emphasize that the NRC did recognize that the plant is safeto continue power operations and that the actions taken to date have furtherimproved the margin of safety not only at ANO, but at all of our other nuclearfacilities," Denault said.
AtPilgrim, the NRC plans to conduct a supplementary inspection of its safetyculture and weaknesses that caused it to increase oversight related to severalunplanned shutdowns. "We will inform the NRC when we're ready forthat inspection, which we expect to be in the second half of this year,"Denault said. In October 2015, Entergy announced Pilgrim,located in Massachusetts, citing among the economic factors behind the decisionthe roughly $45 million to $60 million in added costs necessary to comply withmore complicated and stringent NRC inspections. Entergy plans to refuel Pilgrim in 2017 and run the plantuntil May 31, 2019.
thediscovery of about 220 faulty bolts at its Indian Point 2 reactor in New York, resultingin Gov. Andrew Cuomo calling on the NRC to deny the relicensing for the plant. "Subjectto the completion of engineering analysis we expect to be done with theadditional work and have the plant back online around late June," Denaultsaid.
Entergy's preliminary estimate is for the extended outage atIndian Point 2 to reduce earnings by approximately 20 cents per share, with thebulk of that impact occurring during the second quarter of 2016. "This is primarily from lostrevenue but also includes higher refueling outage costs which we currentlyestimate to be around $20 million. The higher outage cost will be amortizedover the life of the outage with the bulk of the earnings effect in 2017,"Entergy Executive Vice President and CFO Drew Marsh said. "We have thepotential for higher nuclear spending as we execute on our nuclear performanceimprovement plan."
The focus on improving nuclear operations occurs as A.Christopher Bakken III takes overas Entergy's new executive vice president and chief nuclear officer, followingthe planned retirementof Executive Vice President and Chief Nuclear Officer Jeff Forbes, with TimMitchell running the company's nuclear operations in the interim. In November2015, Paul Hinnenkamp assumed therole of senior vice president and COO.
Entergy also remains on track to retire and decommission its851.8-MW James A. Fitzpatrick nuclear plant in New York .